Insurance For Less

CHICAGO, Nov. 7, 2011 /CHICAGOPRESSRELEASE.COM/ – DNP Select Income Fund Inc. (NYSE: DNP) and Duff & Phelps Utility and Corporate Bond Trust Inc. (NYSE: DUC), two closed-end registered investment companies (the “funds”) advised by Duff & Phelps Investment Management Co. (the “Adviser”), have provided an update on their efforts to obtain alternative sources of financial leverage that would enable them to provide additional liquidity to holders of preferred shares in light of the persistent failures in the auction markets.

Because the Adviser and the board of directors of the funds are committed to serving the best interests of both common and preferred shareholders, they continue to seek ways to provide liquidity to preferred shareholders without materially disadvantaging common shareholders and their ability to benefit from leverage. 

To date the funds have retired a portion of their outstanding preferred shares with funds borrowed under a credit facility, but are currently constrained in their ability to refinance all of their outstanding preferred shares with debt by two factors.

First, the Investment Company Act of 1940 requires each fund to maintain 300% asset coverage for debt leverage rather than the 200% required for preferred stock leverage. The Adviser has reviewed the potential use of reverse repurchase agreement (“reverse repo”) financing that would not be subject to the 300% asset coverage requirement, based on current guidance from the Securities and Exchange Commission (the “SEC”).  In a recent concept release on the use of derivatives by investment companies, the SEC has requested comment on whether it should revise its position so that reverse repurchase agreements are also subject to the 300% asset coverage requirement.  The Adviser is monitoring the SEC’s future actions on this topic in order to determine whether a reverse repo structure would offer a long-term solution to the funds’ leverage needs.

Second, the funds are limited in their ability to redeem additional preferred shares by the need to adhere to guidelines established by the two principal rating agencies as a condition of maintaining the AAA rating of the preferred shares. The funds are required by their charters to comply with each rating agency’s guidelines except when a rating agency has confirmed in writing that a proposed action would not adversely affect the rating then assigned to the preferred shares. Among other things, those guidelines require approval from the rating agencies in order for the funds to incur indebtedness.  When the funds obtained consent from the rating agencies to enter into their existing credit facilities, one of the agencies imposed a limitation that no more than 60% of the funds’ leverage could be in the form of debt. The Adviser has recently met with representatives of both rating agencies to discuss the funds’ desire to use additional borrowings and/or reverse repo financing to redeem additional preferred shares.  The Adviser has asked the agencies to consent to the use of such financing for that purpose (and has requested an increase in the 60% limit on debt leverage from the agency that imposed that limit).  The Adviser is awaiting a response from the rating agencies in order to determine whether a refinancing of additional preferred shares with debt and/or reverse repos would be feasible for the funds.

The outcome and timing of the SEC and rating agencies’ reviews are uncertain.  As soon as the funds receive clarity on the issues they will take action consistent with them, and consistent with the three principles that have guided the funds’ efforts to provide additional liquidity to preferred shareholders since 2008: a successful solution should not materially disadvantage common shareholders and their ability to benefit from leverage, the solution should be long-term in nature, and a solution should not encumber the investment process or reduce the pool of available investment alternatives. Because of all the foregoing considerations, the exact timing of any preferred share redemptions is uncertain. The Fund will announce any redemption through press releases and postings to its website.

DNP Select Income Fund Inc. is a closed-end diversified investment management company whose primary investment objectives are current income and long-term growth of income.  The fund seeks to achieve these objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industries.  For more information, visit www.dnpselectincome.com or call (800) 864-0629.

Duff & Phelps Utility and Corporate Bond Trust Inc. is a closed-end diversified investment management company whose primary investment objective is high current income consistent with investing in securities of investment grade quality with emphasis on companies in the public utilities industries. For more information, visit www.ducfund.com or call (800) 338-8214.

Duff & Phelps Investment Management Co. has more than 28 years of experience managing investment portfolios, including institutional separate accounts and open- and closed-end funds investing in utilities, infrastructure and real estate investment trusts (REITs).  For more information, visit www.dpimc.com.

Duff & Phelps is a subsidiary of Virtus Investment Partners (NASDAQ: VRTS), a multi-boutique asset manager with $33.1 billion under management as of September 30, 2011. Virtus provides investment management products and services to individuals and institutions through a multi-manager asset management business, comprising a number of individual affiliated managers, each with a distinct investment style, autonomous investment process and individual brand.  Additional information can be found at www.virtus.com.

SOURCE DNP Select Income Fund Inc.

http://www.dnpselectincome.com

Preferred Shares Update: DNP Select Income Fund Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc. | Chicago Press Release Services – Chicago’s leading press release newswire service; professional press release services, press release distribution and newswire services.

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